How to Choose the FOP Group for Business Registration?

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Симиренко Ганна

Lawyer

Ukraine / Kyiv

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Publication date: 22.09.2024

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How to Choose the FOP Group for Business Registration?

Registering a small business in Ukraine is an important step for every entrepreneur. Specifically, choosing the right FOP group (individual entrepreneur) plays a key role in determining the tax conditions and financial obligations of your business. Each group has its own characteristics, so it's essential to know which one is best suited for your type of activity.

Main FOP Groups: What You Need to Know

First group. Suitable for entrepreneurs who engage in retail trade or provide household services to the population. The maximum annual income should not exceed UAH 1,085,500 (as of 2024). A key advantage is the fixed rate of the single tax (up to 10% of the subsistence minimum), which helps reduce the tax burden for small business registration.

Second group. Chosen by those who provide services, manufacture, or sell goods. According to legislation, this group is suitable for working with legal entities and enterprises. The annual income should not exceed UAH 5,587,800. The tax is set at 20% of the minimum wage.

Third group. The most flexible option for small businesses. This group allows you to work with other legal entities and has no restrictions on the number of employees. The annual income should not exceed UAH 7,818,900. The tax rate can be 5% of income or 3% with VAT.

How to Choose the Right FOP Group?

When choosing a group, it's important to consider several key factors:

• Type of activity. If you plan to engage in retail trade or provide services to the population, the first group might be the best option. However, if you plan to work with other businesses, you should choose the second or third group.
• Expected income. Your annual income is a significant criterion when selecting a group. For small businesses with lower income, the first or second group may be more beneficial, as it allows for lower tax obligations. If you expect higher earnings, the third group is a better option.
• Number of employees. If you plan to hire a large number of employees or work with legal entities, the limitations of the first and second groups may not be sufficient for your business, making the third group more suitable.

Business Registration in Ukraine: What to Consider?

• The process of registration of enterprises in Ukraine, particularly in Kyiv, includes submitting an application to the state registrar, paying the state fee, and receiving an extract from the register. 
• Depending on the chosen FOP group, you will need to select types of activities according to the KVED (Classification of Economic Activities) and submit documents for registration with the tax authorities.
• For those looking to open a company in Ukraine, there are various legal services for registration of enterprises available that include consultations on choosing a group, preparing documents, and full support for business registration turnkey. This can greatly simplify the process and ensure compliance with the law.

Business Registration in Ukraine: Cost

The business registration price depends on the chosen FOP group and additional services, such as consultations or assistance in registering a business. Typically, the price varies based on the complexity of the process and the region of registration. For example, registration of enterprises in Kyiv may be more expensive due to the greater range of services.

Offline FOP Registration

The procedure for registering an FOP is conducted through the Centers for Administrative Services (CNAP) at the place of residence, local municipal authorities, or a notary.

Documents required for registration:

1. Copy of passport;
2. Copy of tax identification number (TIN);
3. Application for registration;
4. Application for single tax (if opting for the simplified tax system).

FOP Registration Application

Form No. 1, which serves as the application for registering an individual entrepreneur, was approved by the Ministry of Justice of Ukraine's Order No. 3268/5 dated 18.11.2016, with an update from 19.05.2020. This form must be filled out in block letters by hand. You can also download the Form No. 1 template online, fill it out on a computer, and print it for submission to the CNAP.

Single Tax Application

• The application for the single tax can be submitted either at the CNAP or directly to the tax service. When submitting the application to the CNAP, it can be filed together with other documents for FOP registration. It’s important to adhere to the deadlines:
• For the 1st and 2nd groups, the application must be submitted within a month after registering the FOP;
• For the 3rd group – within 10 days from the date of registration.
• If deadlines are not met, the taxpayer will automatically switch to the general taxation system. You can submit the documents in person or send them by registered mail with a detailed description of the contents.

Important Points

After submitting the documents, you should receive a document receipt from the CNAP registrar. All documents and receipts should be kept. The extract confirming business registration will be issued within a day at the same center where the documents were submitted.

How to Register FOP Online?

Today, business registration online is a convenient option for entrepreneurs. The "Diia" portal allows you to complete the application online and obtain an electronic signature for submitting the documents. Business registration services simplify this process by allowing you to receive all necessary services remotely. You will need to submit the following documents:

1. Original passport and copies of pages (6 main pages and the page with registration);
2. Original TIN and its copy;
3. Two copies of the application for obtaining the key, which can be downloaded from the website;
4. An electronic device for storing the personal key.
5. After obtaining an electronic signature and selecting the relevant KVED codes, log in to the "Diia" portal and submit the application. Within two working days, you will receive a notification of registration or rejection, which can be checked in your personal account or sent to your email.

FOP Registration Not at the Place of Residence

Please note that for registering an FOP in Kyiv, having a local registration is a mandatory condition. In some other regions, administrative bodies may refuse registration if it does not correspond to the place of residence. However, this is not always lawful. If you are registered in any settlement of the region, you have the right to register the FOP in the respective regional center. You can also use the online registration option or consult a lawyer for assistance in registering a business in a lawful manner.